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2007 Annual Report

NOTE 14 RENT HOLIDAY LIABILITY

This represents amounts received from the landlord for a rent holiday. The accrual is being released having regard
to the expected life of the lease of 9 years.

NOTE 15 RECONCILIATION OF THE NET SURPLUS FROM OPERATIONS WITH
THE NET CASH FLOWS FROM OPERATING ACTIVITIES

		2007 $000's	2006 $000's


Reported surplus		457	411


Add (less) non-cash items:
-	Allocation of receipt of rent free period	(13)	(13)
-	Depreciation/amortisation	364	429

		351	416


Add (less) movement in working capital:
-	Increase (decrease) in creditors	(9)	(142)
-	Decrease (increase) in receivables	42	38

		33	(104)

Add (less) investing activity items:
-	Gain on sale of assets	-	(2)

		-	(2)

Net cash flows from operating activities		841	721

NOTE 16 LEASE COMMITMENTS

The Commission has the following operating lease commitments. These amounts are the total of minimum future
lease payments under the Commission’s non-cancellable operating leases.

	2007 $000's	2006 $000's


- Not later than 1 year	573	515
- Later than 1 year and not later than 5 years	2,619	2,058
- Later than 5 years	382	815

The Commission rents its premises under an operating lease that ends on 1 February 2013. This lease gives the
Commission the right to renew the lease for 3 years subject to a mutually agreed re-determination of the lease rental.
The lease specifies that the Commission is required to make good the premises to the original condition on
termination of the lease. The make good amount is estimated at $20,000.

NOTE 17 CAPITAL COMMITMENTS

Estimated capital expenditure contracted for at balance date but not provided for: $30,238 (2006 - NIL).

NOTE 18 CONTINGENT LIABILITIES AND CONTINGENT ASSETS CONTINGENT LIABILITIES

There are no contingent liabilities at balance date. (2006 - NIL).

CONTINGENT ASSETS

The Commission filed proceedings against six defendants for insider trading (Securities Commission v Midavia Rail Investments and Others) on 13 October 2004. Since then the Commission has reached a settlement agreement with all defendants. Settlement proceeds received are held on trust by Toll NZ Limited. Under section 19 of the Securities Markets Act 1988 the Commission has first claim against money recovered in the proceedings (including in a settlement) for its costs of the proceedings. The final amount of any distribution to the Commission under section 19 is contingent on a decision of the High Court. Commission costs for the proceedings are expected to be $2.0 million. Further costs are expected to be incurred pending the distribution decision of the High Court.

NOTE 19 PROFESSIONAL INDEMNITY INSURANCE

The Commission has effected a professional indemnity insurance policy to provide cover for members and employees of the Commission as the Commission performs its duties and statutory functions.

NOTE 20 SUBSEQUENT EVENTS

There were no material events subsequent to balance date that would affect the interpretation of the financial statements or the performance of the Commission. (2006 - nil)

NOTE 21 TRANSACTIONS WITH RELATED PARTIES

TRANSACTIONS WITH OTHER ENTITIES WITHIN THE CROWN

The Commission is an independent Crown entity under the Crown Entities Act 2004. The Commission is wholly owned by the Crown and the Government is its major source of revenue.

The Commission has entered into a number of transactions with other entities within the Crown on an arm’s length basis. Where those parties are acting in the course of their normal dealings with the Commission, related party disclosures have not been made for transactions of this nature. NZ IFRS provides an exemption for public entities from having to make disclosures in respect of transactions between related parties subject to common control or significant influence by the Crown for transactions that would occur within a normal supplier or client/recipient relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the entity would have adopted if dealing with that entity at arm’s length in the same circumstances. Therefore, in accordance with NZ IFRS such transactions are not disclosed in these financial statements.

As indicated in the statement of financial performance income is received from a Government grant and from administrative services provided to the Takeovers Panel. The Commission has receivables from the Takeovers Panel of $3,908.42 (GST incl).

TRANSACTIONS WITH SUPPLIERS

During the year the Commission paid expenses to:

Genesis Energy, a firm of which A.M. Cotton and J.M.G. Perry, Members of the Commission, are directors. The expenses totalling $55,623, related to office electricity charges which were charged on normal commercial terms. (2006 - $51,059)
New Zealand Institute of Chartered Accountants, of which D.A. Jackson, Member of the Commission, is a member of the Executive Board. The expenses totalling $6,734, relating to membership fees, course fees and publications which were charged on normal commercial terms. (2006 - $6,668)
Enterprise New Zealand Trust, of which Phillip Meyer, the husband of the Chairman is a trustee on a voluntary basis. Expenses totalling $85,000 relate to sponsorships of investment education in schools. (2006 - $80,378)
Chen Palmer Barristers and Solicitors, of which M. Chen, Member of the Commission, is a partner. Expenses totalling $1,021 related to legal advice were charged on normal commercial terms (2006 - nil)
Kiwi Income Property Trust Limited, of which J.M.G. Perry, Member of the Commission, is a director. The expenses totalling $524,866 related to office rent and maintenance which were charged on normal commercial terms (2006 - $470,951 J.M.G. Perry was not a director in 2006).

These transactions are on normal commercial terms and there are no other material transactions between Members and the Commission in any capacity other than that to which they were appointed.
No related party debts have been written off or forgiven during the year.

COMPENSATION OF KEY PERSONNEL

Key personnel comprise the Chairman, Members of the Commission and the senior management team.

	2007 $000's	2006 $000's


Short term employee benefits:
- Members' fees	323	304
- Chairman's salary	331	312
- Chairman’s motor vehicle benefit	34	34
- Senior management team remuneration	1,098	1,020

	1,786	1,670

COMPOSITION OF MEMBERS’ FEES

Members fees are paid on the basis of time spent on the work of the Commission and were:.

	2007 $000's	2006 $000's


C.A.N. Beyer	33	42
M. Chen	17	18
A.M. Cotton	64	36
K.D. Dunstan	61	33
J.L. Holland	8	–
D.A. Jackson	21	20
L.A.J. Kavanagh	21	44
J.M.G. Perry	43	38
C.A. Quinn	14	36
N.O. Todd	41	37

	323	304

EMPLOYEE REMUNERATION

During the year, the number of employees of the Commission, not being Members, who received remuneration and other benefits in excess of $100,000, were:

	Number of Employees 2007	Number of Employees 2006


240,001 to 250,000	1	-
230,001 to 240,000	-	-
220,001 to 230,000	-	-
210,001 to 220,000	1	-
200,001 to 210,000	-	-
190,001 to 200,000	1	1
180,001 to 190,000	-	1
170,001 to 180,000	1	1
160,001 to 170,000	1	2
150,001 to 160,000	1	-
140,001 to 150,000	-	2
130,001 to 140,000	1	-
120,001 to 130,000	2	1
110,001 to 120,000	-	-
100,001 to 110,000	5	3

NOTE 22 BUDGET VARIANCES

INCOME

Significant variances from budget were:

Reduced income from Takeovers Panel due to lower than expected enforcement activity and delays in Securities Legislation Bill (SLB) regulations getting passed
Increased income from interest due to higher than expected average cash balances and bank interest rates

EXPENDITURE